Family tax benefits barrier to apprenticeship starts

Learners are turning down apprenticeships as families cannot afford to miss out on vital benefits payments.

An investigation by FE Week has found families lose child benefit and child tax credits, if a young dependent person takes up an apprenticeship, with the national apprentice minimum wage rate of £2.50 an hour.

Although the minimum wage, which is due to rise to £2.60 from October 1, is designed to offer a pay which is greater than money received in benefits, some families face being left more than £150 out of pocket.

This startling reality has proved a barrier for entry, forcing them to make the difficult decision to pull the plug on an apprenticeship – causing the young person to miss out on work experience – in favour of a college-based programme.

Patrick McLeod, head of business engagement at Filton College, said a learner turned their back on an apprenticeship, due to be paid £2.50-per-hour for working 30-hours-a-week, after it proved too costly for the family.

Mr McLeod said the mother was told she would lose her £60-per-week in child tax credits, child benefit of £20-per-week and £159-a-month in child support allowance. Taking into account the minimum wage whilst on an apprenticeship, that left her £179 out of pocket per month.

…mothers “won’t let” a family member do an apprenticeship”

Mr McLeod said: “It’s a lot of money to lose a month. The learner turned down the apprenticeship and did a full-time college-based course. It was a shame because they had the chance to get employment experience.”

He also believes it could have a far wider impact, adding: “I’m sure it has and will put people off apprenticeships. There might be many people who have looked into it themselves, made their decision not to do one and not told us about it.”

FE Week understands this is just one of a number of similar cases affecting families. One senior staff member at a London college said they are aware of three cases where mothers “won’t let” a family member do an apprenticeship.

The staff member, who asked to remain anonymous, said: “Parents need to be made aware of the opportunities. They can only see benefits disappearing.”

The National Apprenticeship Service (NAS) said employers often pay more than the minimum wage, but they are aware of benefit issues.

A statement from NAS said: “(We have) been made aware that this is an issue for some apprentices and their families.

“Although the minimum wage for apprentices is £2.50 an hour, employers often pay more, and the average apprentice pay is £170 take home pay per week.”

Lynne Sedgmore CBE, executive director of 157 Group, said they are “fully behind apprenticeships” and the benefits they bring to learners.

However, she also added: “In a well-planned apprenticeship programme, both the employer and young person reap substantial benefits, which is why we have been shocked to learn some providers are employing young people as apprentices for just 16 hours per week at the minimum wage of £2.50 per hour.

“This results in a loss of child benefit and child tax credits so hard-working families are losing money, while young people lose valuable work experience.”

A spokesman for HM Revenue & Customs (HMRC) said child tax credit and child benefit cease when a young person takes on a waged apprenticeship.

He said: “Yes that would be true in all cases. It is only when a young person continues in full time, non-advanced education or unwaged training that we treat them as dependent on their parents.”

Feedback

Sivia Sockett

I TRULY THINK THERE SHOULD NOT BE AN APPRENTICESHIP MINIMUM WAGE-JUST A NATIONAL MINIMUM WAGE-EMPLOYERS I HOPE WOULD SEE THE BENEFIT OF PAYING A YOUNG PERSON THE JOB WORTH.
SOME EMPLOYERS WILL GET RID OF APPRENTICESHIPS WHEN THEY DO HAVE TO PAY THE MINIMUM WAGE WHICH IS A SHAME
LETS JUST SAY GOODBYE TO THE ‘APPRENTICESHIP MINIMUM WAGE’

Adam Betts

Indeed employers would get rid of apprentices if they had to pay the proper minimum wage, hence the need for an apprenticeship minimum. You can’t increase employment by pricing labour out a job. The higher the minimum wage the more unemployment, particularly at the margin (i.e. young persons, unskilled persons).

The beauty of an apprenticeship is it allows a youngster (or an adult for that matter) to begin employment on low pay (at their rate of marginal productivity) and once their apprenticeship ends, their pay moves up a level, in line with their productivity (or ‘worth’ to the employer).

Michael Cavanagh

This is an often repeated assumption. Years ago I did a bit of research into this and the only empirical research on the subject (USA – where state minimums varied) showed that an increased minimum wage resulted in a slight increase in employment, a decrease in recruitment costs because of increased retention of staff, greater skills development at minimum wage level positions and higher consumer satisfaction as staff were more knowledgeable and there was an increased level of continuity of staff.

anth mills

Without trying to sound controversial, why would an employer offer an apprenticeship to someone whom they would be required to pay the national minimum wage to? For this sum they could most probably employ a skilled person who could instantly be more productive. For the patents who will not allow their children to study apprenticeships for financial reasons, all they are doing is delaying the problem; the youngster will complete their college course and still not have any employment experience. So what will their choice be? Another college course, thousands of pounds of student debt or state benefits.

Lindsay McCurdy Group Manager LinkedIn Apprenticeships London

What i think is wrong that if a person starts an apprenticeship on the apprenticeship min wage at the moment 2.50 aged 16 then continued onto a level 3 the employer is allowed at present to pay the min wage until the apprentice reaches 19, if an apprentice starts at 19 the employer is only allowed to pay the min wage for 1 year.

lou

Appalled to find that I myself as a lone parent cannot take on an apprenticeship at 2.50 an hour and receive working tax credits … what is that all about … I was sure the government wanted me to retrain and begin working ASAP … confused to say the least !

Lee

What is not made clear in the article is that once the 16 year old no longer qualifies for Child Tax Credits or Child Benefit the maintenance payments made to the CSA by the ex husband/wife also cease. My son has just begun his apprenticeship and I have lost a total of £600 per month. He is only earning £350 a month. So far as I can see he is not entitled to any other benefits as he is only 16 but, as has been previously mentioned, he does not even qualify for free prescriptions etc.

jess

ok there a vital part missing in this research as i have myself just found out as my son is wanting to do an apprenticeship.. so here the low down. yes mother lose child benefit and child tax this is not the entire issue as this would happen when there 18 anyway so for me this is do able .. however and this is the clincher as a result of losing these benefits a under 18 on an apprenticeship is classes as a non dependent meaning that you are no longer classed as a parent to a dependent so you get a reduction in your housing benefit and council, the new bedroom tax mean no you have a spare room only you don’t because your child is in it, so they declare that but now there an adult there there expected to pay toward the cost of the extra rent ect only there on an apprenticeship and the amount earn doesnt cover it. there under 18 so cant get housing benefit so the parent not only do they have less money and more to pay but physically cant keep a roof over there head because they have to pay for the extra room that isn’t an extra room. so there left with two choices .. one get a one bedroom place and have there 16/17 sleep on a pounce or in there room .. assuming you can actually get a one bedroom place … or make the devastating choice of not letting them have an apprenticeship until there 18… so this is not about just losing child benefits it about keeping a roof over your head whist they do an apprenticeship… so i ask you what choice would you make?

Caro

I am a single parent and a widow, I have lost all my child benefit and Widow’s allowance since my son took up an Apprenticeship, which pays less than £150 per week. I have also lost my single person’s 25% reduction for Council Tax as my son is now 18.
Fortunately I own my house and work part time but it has been tough and I can really empathise with Single Parents.

Fiona

I am a single parent and have brought up 2 children for the last 8 years. both my children are on apprentiships and I work 24 hours a week.I have searched for options but there is no help for us any more. I would like more hours but I have hip problems and had 5 opperations over 10 years and still in pain but guess what,I dont qualify for disability allowance either. We are on our own bringing in £1200 a month and struggling to pay a morgage and food bill is £60 a week for 3 of us. I think CTC/WTC should continue untillthey are 20 and astablished as young adults. Keeping youngesters at home and supporting them is important, not kicking them out because you cant afford to keep them.

Sarah

My son has been doing an apprenticeship for the last 12 months he has just turned 18 I am a single parent to 2 children I’ve lost my tax credits and child benefit and now I’m losing over £100 in housing benefit which now means I’m getting almost nothing I work 21 hours a week and really struggling financially when I take it up with the housing department they just say it’s because he’s bringing in an income he works 40 hours a week for a£100 do they think that us parents say give me all your wage I have bills to pay I think it’s disgusting that the government are punishing parents for there children wanted to do something for there future he’s looking to do his level 3 in June but I will get even more housing benefit taken off me it’s so not fair and that fact that if he was on job seekers allowance I wouldn’t lose any housing benefit makes my blood boil